Stablecoins for payments. 6 chapters and a final quiz.

Chapter 1. The mechanics: issuance, reserves, redemption.

A stablecoin is a token issued on a public blockchain whose value is pegged to a fiat currency, almost always the dollar. Unlike bitcoin, it does not promise to gain value. It promises to be worth exactly 1 unit of the reference currency at all times. Three pillars support that promise: controlled issuance, reserves covering 100% of the tokens in circulation, and a right of redemption (repayment at par) that holders can exercise with the issuer.

Reserves: the real balance sheet behind the token

The large issuers now hold their reserves mainly in short-term US Treasury bills, repurchase agreements (repo), and cash. Circle keeps most USDC reserves in the Circle Reserve Fund, an SEC-registered money market fund managed by BlackRock. An audit firm (Deloitte) publishes monthly attestations on it, while Tether publishes quarterly attestations (BDO). At the end of 2025, Tether's Treasury exposure exceeded $100 billion. That holding ranks the issuer among the world's 20 largest holders of US debt, ahead of many countries. This massive investment in short-term debt explains why the business is so profitable: Tether reported $13 billion in net profit in 2024 with a few hundred employees.

Why the peg holds: arbitrage

On the secondary market, nobody “defends” the price around the clock, and arbitrage alone holds the peg. If the token trades at $0.995, an arbitrageur buys it and redeems it at par with the issuer, pocketing the difference, which pushes the price back up. If it trades at $1.005, the arbitrageur mints tokens at $1 and sells them. The peg holds as long as redemption is credible, fast, and frictionless. Once the market doubts the issuer's reserves or its banking access, arbitrage seizes up and a depeg becomes possible. We come back to this in chapter 6.

Chapter 2. The big four: USDT, USDC, EURC, PYUSD.

The stablecoin market is an oligopoly: two dollar tokens account for most of the supply, while euro tokens are still in their infancy. Any payments professional choosing a settlement asset needs a precise profile of each issuer: legal status, reserves, supported chains.

Chapter 3. Regulation: MiCA in Europe, the GENIUS Act in the US.

Between mid-2024 and mid-2025, stablecoins went from the Wild West to a regulated asset in the world's two largest financial markets. Europe moved first with MiCA, and the US followed with the GENIUS Act. The two laws converge on substance: 100% reserves, redemption at par, supervision. They diverge on points that determine who can operate where.

The operational consequences are already visible. Tether gave up on MiCA compliance and left the regulated European market. In September 2025, it announced USA₮, a token built for the GENIUS framework. Circle took the opposite path, getting licensed everywhere, and is reaping the institutional rewards. For a European PSP, the practical rule comes down to two points. Offer clients only MiCA-compliant EMTs, and document each token's regulatory status exactly as you would document a correspondent bank.

Chapter 4. Use cases: cross-border B2B, settlement, remittances, AI agents.

First, a misconception to clear up. Stablecoins are almost never used to buy a loaf of bread; their comparative advantage lies elsewhere. It shows wherever money has to cross borders, time zones, or weekends, and wherever the payer is not a human. Four use cases account for the proven value.

Cross-border B2B: the correspondent-bank killer

A supplier payment from Europe to Asia traditionally goes through two to four correspondent banks, with stacked fees, opaque FX, and settlement in one to three business days. In stablecoins, the same payment works like this: a local on-ramp (EUR → USDC), an on-chain transfer in seconds, and an off-ramp through a licensed provider in the destination country (USDC → local currency). Specialized infrastructure providers (Bridge, acquired by Stripe, BVNK, Conduit…) are industrializing this flow for treasurers, led by the Latin America and Africa corridors. Here the stablecoin is a settlement vehicle, held for a few minutes, and the company takes on no lasting crypto exposure.

Settlement: when Visa settles in USDC on a Sunday

Since 2021 (a Crypto.com pilot), Visa has let certain acquirers settle their positions in USDC instead of by bank transfer. In 2023, it extended the program to the Solana blockchain with acquirers Worldpay and Nuvei, and settled volumes have grown sharply since. Mastercard followed in 2025, announcing settlement in USDC, PYUSD, or FIUSD. The benefit is mundane: weekends stop being a risk and a cost, because an acquirer can settle with the network on Saturday and Sunday instead of tying up collateral until Monday.

Remittances: a yawning cost gap

Honesty matters here. The on-chain cost is negligible, but the end-to-end cost depends on the local ramps, meaning currency liquidity, the provider's license, and any cash-out. On liquid corridors (US → Mexico, Gulf → Philippines), the savings remain massive. PayPal has built on this by connecting PYUSD to its Xoom transfer service.

AI agent payments: money for machines

An AI agent buying a piece of data for $0.001 cannot open a bank account or complete 3-D Secure. Stablecoins offer exactly what it lacks: a bearer instrument that is programmable, infinitely divisible, and settles in seconds. Two building blocks shape the field. The first is x402 (Coinbase, May 2025), which revives the HTTP 402 Payment Required status code to charge for an API call in USDC. The second is AP2 (Google, September 2025), an agent payments protocol launched with more than 60 partners, which includes an x402 extension. Visa (Intelligent Commerce) and Mastercard (Agent Pay) are pushing their card rails into the same space, and the battle for the agentic economy is wide open.

HTTP/1.1 402 Payment Required
Content-Type: application/json

{
  "x402Version": 1,
  "accepts": [{
    "scheme": "exact",
    "network": "base",
    "asset": "USDC",
    "maxAmountRequired": "1000",
    "payTo": "0x209693Bc6afc0C5328bA36FaF03C514EF312287C",
    "resource": "https://api.example.com/premium-report",
    "description": "Single access to the report (0.001 USDC)"
  }]
}

-- The agent signs a matching USDC payment, replays the request
-- with the X-PAYMENT header, and receives the resource: no account,
-- no subscription, no human in the loop.

Chapter 5. On- and off-ramps: moving in and out of the on-chain world.

In a stablecoin payment, the critical link is the ramp, not the blockchain itself. The on-ramp converts account money (EUR, USD) into tokens; the off-ramp does the reverse. That is where compliance (KYC, AML/CFT, travel rule), banking risk, and most of the costs are concentrated. A payments professional needs to map these ramps the same way they map their acquirers.

• Licenses: CASP under MiCA in the EU, money transmitter license or trust charter in the US, local licenses in every off-ramp corridor
• Travel rule: transmitting originator and beneficiary information with transfers (TFR in Europe, FATF Recommendation 16 elsewhere)
• Screening: checking addresses against sanctions lists (OFAC, EU) before any conversion, with tools such as Chainalysis or Elliptic
• Reconciliation: matching on-chain events, ramp ledger entries, and bank statements, meaning three sets of records and three clocks
• Accounting and tax: balance sheet classification of the token, treatment of EUR/USD exchange, how long the float is held
• Float management: minimizing how long the stablecoin is held to reduce depeg risk and counterparty exposure

Chapter 6. Risks (depeg, AML) and the positions of Visa, Mastercard, and PayPal.

Depegs: when the promise breaks

A stablecoin never fails slowly; it depegs. Recent history offers three textbook cases with very different mechanisms, which is why you need to know all three.

AML: the blind spot and the fix

Pseudonymity and instant transfers make stablecoins a favored vehicle for financial crime. Chainalysis estimates they account for about 63% of illicit on-chain volume (2024 report), ahead of bitcoin. But the image of a lawless zone is outdated, because centralized issuers can freeze addresses. Tether has blocked more than 2,700 addresses and helped take down the Russian exchange Garantex (March 2025, about $27 million frozen). Public blockchain traceability does the rest: every flow can be analyzed forever, which no banknote allows. The net is tightening: the travel rule (EU TFR, FATF), mandatory screening at ramps, and OFAC sanctions on mixers.

Payment giants: co-optation over denial

Facing a rail that could disintermediate them, the card networks and large PSPs chose co-optation. They are positioning themselves as the trust, acceptance, and orchestration layer on top of stablecoins, though their strategies differ in where they enter.